FW: CIMB Daily Fixed Income Commentary - 19 Sep 2017 - Cautious before FOMC / IDR bonds upbeat ahead of BI meeting

 

US Treasuries. FOMC this week and UST starts off weak. Balance sheet normalization is a given and questions remain if policymakers have become more certain about the outlook for inflation as there was disagreement surrounding that at the previous meeting.

Malaysia. Ringgit govvies weakened to track UST losses late last week, as investors turned cautious awaiting FOMC outcome. Meanwhile, flows concentrated on front end of the curve early this week. Sentiment was supported as Treasury Sec-Gen Tan Sri Mohd. Irwan Serigar Abdullah stated the country is on track of reaching budget deficit of 3% of GDP in 2017.

Thailand. Bonds fluctuated in tight range and low outright trading value at Bt63.40 billion amid light macro data. Auction of 91-day T-Bill of THB2.5 billion still maintain solid buy momentum of lower average yield at 1.16% ( high and low yield are equal at 1.16%) and bid-cover 3.32x from local support. Meantime, foreign investors were net sellers of Thai bonds at Bt6.99 billion while buying Bt4.59 billion of long-term bonds.

Indonesia. IndoGB opened on biddish tone, amid speculation on another cut on 7-day reverse repo rate on Friday's BI meeting, fueled by Finance Minister's view that BI is looking at possibility for further rate cuts. Bloomberg survey shows that 6 out of 14 economists predict that BI will cut rate by 25bps. Volume looked thin today as market players prefer to wait until tomorrow's auction, which we see high demand. Market volume decreased to IDR11.6 trillion and concentrated on bonds maturing in between 1 to 5 years (36%) and between 5 to 10 years (41%).

Asian USD credits. USD credits were trading near prior levels, amid a lack of new development post North Korea's latest missile launch late last week. Aside, traders were also seen taking cue from upcoming FOMC meeting this week. In the primary space, KWG Property's 5NC3 bond was guided at 5.3%, while Kookmin Bank's 5.5-year and Mirvac 9.5-year bond were heard pricing around 115 and 150bps above Treasuries.

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